04/13/1994 04:15 PM Senate RES

 CHAIRMAN MILLER called the Resources Committee meeting to order at            
 4:15 p.m. and announced  SB 371  (MINERAL EXPLORATION INCENTIVE               
 CREDITS) to be up for consideration.                                          
                                                                               
 GERRY GALLAGHER, Director, Division of Mining, said they have a               
 problem with granting exploration incentive credits to the industry           
 which is strictly a fiscal concern.  There is not much money coming           
 in and they are very concerned with opening the back door on the              
 general fund with anything that would lessen it.                              
                                                                               
 He said that mental health and school trust lands needed to be                
 exempted specifically so the Department doesn't end up in                     
 litigation.  This could be fixed on page 1, line 8 after the word             
 "grant" insert ",unless otherwise provided by law," so the                    
 Department could identify these lands and exempt not all of the               
 credit, but the royalty portion of the credit.                                
                                                                               
 He explained they had to make some projections about the number of            
 new mines that would happen in the next 15 years to come up with              
 the fiscal note.                                                              
                                                                               
 SENATOR FRANK asked if he considered any taxes and royalties that             
 might accrue because of the credit.  MR. GALLAGHER said that was              
 not considered, but he didn't know how to put it in a fiscal note.            
 He believed the fiscal notes were realistic in terms of royalties             
 and where they were going to go.                                              
 SENATOR MILLER thanked Mr. Gallagher and announced  SB 371  to be up     p    
 for consideration again.                                                      
                                                                               
 DAVID ROGERS, Counsel for the Producers Council, said the primary             
 element of the bill authorizes exploration incentive credits which            
 can be used by qualified applicants to offset tax and royalty                 
 obligations.  It applies to coal and leasable and locatable mineral           
 exploration activities.  The activities which qualify for credits             
 include geophysical and geochemical surveys, drilling exploration             
 holes, aerial photography, and other exploratory work.  The earned            
 credits can be applied against general corporate income taxes,                
 mining license taxes, and royalties.  Qualified exploration                   
 activities must be documented.  The maximum credit available is               
 equal to 60% of direct labor costs for Alaska residents and 50% of            
 other eligible costs as defined in the bill.                                  
                                                                               
 SENATOR LEMAN noted that this should be checked with SB 151 to see            
 if it is consistent with the credits.                                         
                                                                               
 DAVID STONE, President, Council of Alaska Producers, supported SB
.  He said throughout the world, countries are actively courting           
 mining companies by offering economic incentives and other                    
 inducements and it has been particularly successful in Chile and              
 Mexico where privatization and tax incentives have revitalized                
 their mining industries.  At the same time obstacles in the lower             
 48 are forcing many companies to look elsewhere.  SB 371 is one of            
 the things we should do to draw more industry attention to Alaska             
 and compete in the increasing competitive global market place.                
                                                                               
 STEVE BORREL, Executive Director, Alaska Miners Association,                  
 supported SB 371.  It would allow credit for a percentage of                  
 certain specified direct expenditures that are made during the                
 early exploration stage.  The credit cannot be taken until the                
 project actually begins to be an operating mine.  The credits can             
 be transferred which is important for a future sale of the mine.              
 He concluded by saying that SB 371 will send a positive message to            
 the international mining industry that Alaska is improving the                
 investment climate and is working to encourage mineral development.           
 SENATOR MILLER announced  SB 371  to be up for consideration.  He             
 said there was a proposed amendment on line 8, page 1 after the               
 word "grant" to add "unless otherwise provided by law."                       
                                                                               
 SENATOR LEMAN moved the amendment.  There were no objections and it           
 was so ordered.                                                               
                                                                               
 SENATOR LEMAN moved to pass SB 371 from committee with individual             
 recommendations.  There were no objections and it was so ordered.